Shareholder punishment

Although there is hardly precedence among listed ICT companies for being transparent, I still have to ask myself whether Pinnacle's board thought it could get away with waiting what seems like ages before disclosing that one of its executives had been arrested, and charged, for allegedly bribing a cop.

Or, perhaps, the board thought it would buy itself some time until the news came out. I doubt we'll ever know; the same way we'll never know what possessed Faritec to try and flog off valuable assets without telling shareholders, when these were worth far more than 10% of its market capitalisation. Not that the company was worth much by that stage anyway.

Clarity behind the did-he-or-did-he-not have permission to borrow Telkom money to buy millions of rands worth of shares is also something Telkom CEO Sipho Maseko and CFO Jacques Schindeh"utte can only ever shed light on. After that gaff, Maseko was instructed to take a corporate governance course.

I'm sure there are umpteen other examples of cases in which shareholders - like a cuckold husband - have been the last to know what companies in our sector, and others, are up to behind closed doors. Sadly, in all of these instances, it is the investor who loses out.

Unfortunately, those who don't learn from their mistakes are doomed to repeat them, with apologies to whoever actually coined that phrase. The latest in a long line of company-first decision-making processes is Pinnacle, and it has let down shareholders too.

Regardless of whatever advice it received, and even if its actions will pass muster, its handling of telling shareholders about Takalani Tshivhase's arrest let down every shareholder - apart from those on its board - who put their faith in the company's ability to give them a return on investment.

The company has said its lateness in talking to the market was because there was no certainty that its executive would be charged, after he was hauled away from his Kempton Park office earlier in the month. That hasn't washed at all with shareholders, as the sell-off shows.

But, here's the thing. ICT companies are - internationally, at the moment - flocking to list. At least 30% of new listings in the pipeline in the US are technology stocks.

I have reason to believe this trend will also come to SA. It would be great if we were able to incubate even more companies and spin them onto the bourse so they can raise money, and become giant entities.

Sadly, thanks to the sector's track record, I don't think a new listing would garner much appetite. As an investor, I would be inclined to look for safer stocks; ones that are not built on new-fangled ideas and have not already been tainted by the behaviour of their big brothers.

If I suddenly found myself with spare cash to put into a stock, one of my criteria would be, obviously, to invest based on returns.

I would also take other, softer issues into account. These would be things like how transparent a company is, whether its board is properly constituted, and whether the firm has ever been in trouble with one or other oversight entities, like the JSE.

I would also look at how it conducts itself and its business generally. For example, I would shy away from companies that avoid stakeholder - including media - inspection.

Sure, some of my criteria [mine: this is not advice] would be based on totally subjective feelings and not any hard facts. It's a personal thing: I would feel happier putting hard-earned cash into a company that feels 'good'.

Beyond the harm that will be done to the sector as a safe haven for investors by companies that maintain a stiff silence, any short-term benefits that may be reaped by staying schtum will eventually come back to bite those firms where it matters: their bottom lines.

Faritec is a case in point. After it couldn't sell those units, it folded. Although I have my doubts as to whether it would have survived anyway, given the amount of money it needed to raise and the small dent the profit on sale would have made in its need for cash. Perhaps shareholders would have been more open to investing had it been transparent.

Then there's the Telkom CFO incident. Telkom has yet to tell us what the charges against Schindeh"utte are, which creates a sense of unease in the market. Likewise, the outcome of the forever ongoing disciplinary doesn't seem likely to be made known any time soon, especially since no one except the involved parties know what stage the proceedings are at.

Then there's Pinnacle. Although the matter has yet to be decided, I believe the prominence of the matter, regardless of other shenanigans that may be going on in the distribution sector, will lead to orders being placed with its competitors.

It's about trust. By not being transparent, these companies - and others - are not earning anyone's trust.

To steal an old advert pay-off line: "Makes you think, doesn't it?"